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The Importance Of Convergence Of Ifrs And Us Gaap

769 words - 4 pages

The concern of companies could provide significant differences in financial information by adopting different set of standard had made convergence IFRS and US GAAP become important. For instance, although company value is not affected by accounting policies but valuation techniques like EBITDA multiples can be impacted due to earnings variations resulting from accounting policy differences between IFRS and US GAAP. (Bauman, DeSmith, Jones, Py, Schmid, & Sheward, 2013) Furthermore, in some circumstances, the accounting differences between the boards could turn positive earnings into a loss after some adjustment has been made on conversion of IFRS to US GAAP. Companies will report better ...view middle of the document...

S. GAAP would result in compliance with IFRS. The boards were aimed to eliminating the differences in the U.S. GAAP and IFRS through a series of convergence project. Moreover, through this convergence project, the boards would put effort on improving any deficiency in the financial reporting where there is a need for improvement. (Pacter, 2013)
In addition, convergence project has helped to promote simplicity, consistency, transparency, and reduce conflict and confusion when adopting the accounting standards. The FASB has taken few steps to promote convergence of accounting standards in order to improve the quality of financial reporting. Besides, the board also intended to improve the common understanding of the nature and purposes of information prepared by every company.
According to the 2011 US IFRS outlook survey, the response for whether endorsements approach will be a viable approach toward using IFRS in the US was largely favorable by three-quarters of respondents. Subsequently, FASB would lead a process to incorporate IFRS into US GAAP over a specific period and thus ultimately US issuers would end up in compliance with both US GAAP and IFRS. However, among the 75 percent of respondents that thought the endorsement approach was viable, but not all of those people agreed that it was a best method for the US to incorporate IFRS. Next, the survey also shows that 70 percent of respondents have selected the increase in comparability of financial...

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